The mistake of equating all open source technology with Linux was "really very early on," Paoli says. "That was really a long time ago," he says. "We understand our mistake."

Reading the original quote it is clear that they still dislike Open Source:

The way the license is written, if you use any open-source software, you have to make the rest of your software open source. If the government wants to put something in the public domain, it should. Linux is not in the public domain. Linux is a cancer that attaches itself in an intellectual property sense to everything it touches. That's the way that the license works.

What they have and had problems with are actually the GPL licenses and how it attributes copyright. This limits Microsofts ability to make use of open source efforts in their propietary software.

What Microsoft should be saying is that they support open source only when they can make use of it in their world of closed source. This is not working WITH open source, it is working AGAINST open source.

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